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Bailey Sees 'Mouse' of a Gas Rule Delivered by Christmas

Commissioners Linda K. Breathitt and Vicky A. Bailey last week
joined the club of those confused about when, if ever, FERC might
settle the huge number of gas issues that have been on its plate
for more than a year. Much to the chagrin of the industry, which
has been anticipating some type of FERC action soon, Breathitt
indicated it would take up to six more months, while Bailey
predicted the Commission would be delivering a package of gas
decisions by Christmas.

Both appeared to agree on one thing, however. The present
delivered won't be nearly as big as the Commission led on. "That,
to some of you guys - maybe more than girls - means that after all
this labor the elephant will deliver a mouse..," said Bailey.

"I do think that a majority of the Commission will be
disinclined to significantly tamper with a system that appears to
work well," she said at a conference on FERC regulation sponsored
by Financial Times. Whatever the Commission decides to do, it will
"not fall toward the radical end of the spectrum," despite the
scare tactics FERC used to draw an army of industry attorneys out
of their corporate cubbyholes and into Washington.

Bailey said although there was no consensus among industry
comments on the notice of proposed rulemaking (NOPR) on short-term
transportation capacity issues or on the notice of inquiry (NOI) on
long-term transportation capacity regulation, one common theme did
emerge. "That theme falls under the heading 'whatever you do
Commission, do no harm.'

"There seems to be no great clamor for change to the post-Order
636 world that there was earlier. Everyone is telling me that the
regulatory regime is working quite well. It seems that the comments
lean more toward a fine-tuning and making adjustments around the
edges. I suspect that's probably what we'll actually do." Breathitt
agreed that this course - minor tweaking - might be the wisest for
the Commission now.

Bailey said there has been entirely too much focus on the
short-term capacity auction idea, but she indicated the Commission
likely got the message from the nearly unanimous industry
opposition. Producers did voice some support for the proposal.

Speaking at The LDC Forum sponsored by the Interchange Group in
Chicago, IL, last Monday, Breathitt expressed interest in dividing
up the NOPR and NOI issues, leaving the most contentious to be
decided at a later date. She said FERC proposals on
term-differentiated rates, enhanced market transparency and changes
to penalty procedures were ripe for review, and should be included
in a final rule. But like Bailey, she believes final action on the
Commission's more controversial proposals for daily auctioning of
pipeline capacity and negotiated terms and conditions of service
should be postponed.

"After reviewing the [industry] comments we received, I know I
am not alone in the belief that the time isn't ripe for a massive
policy shift," she said at the Forum. She believes the two-pronged
approach she advocates for dealing with the gas issues "appears to
be one that many in the market could support." Perhaps, she
suggested, "the wise decision would be to continue to make progress
on our present course, with appropriate adjustments." while at the
same time "analyz[ing] whether more extensive changes in our
polices are necessary in the long term....."

Bailey said to expect a decision on removing price caps on
released capacity and on how to address the perceived potential for
the exercise of marker power by pipelines.

Despite rumors that FERC staff already has ironed out the
details, Bailey said she has not seen anything yet. "There may be
something circulating that I'm not aware of, but they haven't
forwarded any recommended proposals to the Commission for
consideration. That appears that maybe we're not as far down the
road as we should be."

Rocco Canonica, Washington, D.C.;

Susan Parker, Chicago

&COPY;Copyright 1999 Intelligence Press, Inc. All rights
reserved. The preceding news report may not be republished or
redistributed in whole or in part without prior written consent of
Intelligence Press, Inc.

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